Hyper-Automate Your Invoice Approval Workflows

Invoice approval workflows are the backbone of an efficient accounts payable (AP) department. Yet, many organizations struggle with clunky processes that cause bottlenecks, confusion, and costly delays.

According to Skynova, 49 percent of businesses require two to three people to approve an invoice, while a surprising 22 percent require an astounding six or more. And Ardent Partners finds that 47 percent of AP teams say invoice approvals take too long, and are the number one tactical problem delaying the process. AccountingWeb surveyed 200 AP professionals who said 20 percent of their time was spent managing approvals, equal to one business day a week. However, the best-in-class AP organizations, according to SAP Concur, process their invoices and payments at rates 60 to 80 percent lower than their peers.

In today's fast-paced business environment, where every dollar counts, having a streamlined and automated invoice approval workflow is more critical than ever. This article explores best practices for designing an effective invoice approval process, the role of automation software in approval workflows, and how AI is revolutionizing how AP teams optimize invoice approvals.

The pain points of clunky invoice approval workflows

Invoice approval workflows are an integral part of invoice processing and bill pay, but can be a significant source of frustration for finance and accounting professionals. Common pain points include:

• Bottlenecks: Invoices often get stuck in the approval process due to unclear responsibilities or lengthy manual checks.
• Confusion on approvals: When multiple approvers are involved, it can be unclear who is responsible for approving what, leading to delays and errors.
• Missing data and information: Incomplete or incorrect invoice data can cause rework, further slowing the process.
• Routing issues: Manual routing of invoices can result in lost or misrouted documents, leading to late payments and strained vendor relationships.
• Lack of automation: The entire process relies heavily on manual intervention, increasing the risk of errors and delays.

These challenges impact the efficiency of the AP department and the organization's overall financial health. Delayed payments can result in missed early payment discounts, late fees, and damaged vendor relationships. 

What does a good invoice approval workflow look like?

A well-designed invoice approval workflow should be seamless, efficient, and transparent. Here are the key features and parameters that define an effective workflow:‍

• Clear roles and responsibilities: Every participant in the approval process should clearly understand their role and what they need to approve.‍
• Automatic routing: Invoices should be routed to the appropriate approver based on predefined rules, reducing manual intervention and routing errors.‍
• Rules-based approvals: Should be based on predefined criteria such as spending thresholds, vendor types, or contract terms. This ensures consistency and compliance with company policies.‍
• Transparency: The workflow should provide visibility into the status of each invoice, allowing stakeholders to track progress and identify bottlenecks.‍
• Flexibility: The workflow should be adaptable to different types of invoices and business scenarios, ensuring it can handle various complexities.‍
• Audit trail: A comprehensive audit trail should be maintained, capturing all actions taken during the approval process for compliance and reporting purposes.

Best practices for designing an invoice approval workflow

Designing an effective invoice approval workflow requires careful planning and consideration of various factors. There are a variety of basic templates and flowcharts available in the industry to leverage in process design (simply search for “invoice approval flowchart”), but here are some best practices to follow:

1. Map out the current process: Start by documenting the current workflow, identifying bottlenecks, inefficiencies, and areas where automation can be introduced.
2. Define approval criteria: Establish clear criteria for approvals based on invoice amounts, vendor types, and other relevant factors.
3. Implement automation: Introduce or leverage automation tools to handle repetitive tasks, such as data entry, routing, and notifications. This reduces the risk of errors and speeds up the approval process.
4. Incorporate flexibility: Ensure the workflow can accommodate exceptions and special cases without causing delays.
5. Train your team: Provide training to all stakeholders involved in the process to ensure they understand their roles and how to use the automation tools effectively.

The importance of AP automation software for invoice approvals

Automation software is essential for supporting an efficient invoice approval process. When selecting automation software for invoice approvals, consider the following features to ensure it supports your ideal workflow and supports best practices:‍

• Automatic routing: Automation ensures that invoices are routed to the correct approver based on predefined rules, reducing manual intervention and errors.‍
• Rules-based approvals: Automation software can enforce approval rules based on criteria such as spending thresholds or vendor types, ensuring compliance and consistency.‍
• Roles-based approvals: Instead of setting up approval flows by the individual, consider roles-based approvals.The ability to assign different approval responsibilities to different roles, ensuring a more organized and efficient workflow that updates in real time based on organizational changes. HR system integration capabilities allow even more flexibility and control over approvals configuration.‍
• Out-of-office feature: An out-of-office feature can reroute approvals to alternate approvers, ensuring the process continues smoothly even when key personnel are unavailable, preventing delays in the approval process.‍
• AI-powered features: AI can enhance automation by learning from past approvals, predicting potential issues, and suggesting optimal approval paths.

The role of AI in invoice approvals

AI transforms invoice approval workflows by enabling straight-through processing, autonomous approvals, and intelligent data extraction. Here’s how:

• Straight-through processing: AI can process invoices without human intervention, identifying errors, flagging exceptions, and routing invoices for approval based on predefined criteria.‍
• Autonomous approvals: AI can approve invoices autonomously within certain limits or parameters, reducing the workload on human approvers and speeding up the process.‍
• Data extraction and validation: AI can accurately extract and validate data from invoices, reducing the risk of errors and ensuring that all necessary information is captured.

What are dynamic approvals?

Dynamic approvals refer to the ability of AI-powered AP automation software to adapt the approval workflow process based on varying conditions and rules. This robust flexibility ensures that invoices are routed to the appropriate approvers efficiently, accounting for different scenarios and business requirements.

Dynamic functionality for approval workflows allows organizations to handle complex scenarios with ease. For example, AP teams can implement conditional routing, where rules-based workflows determine the approval path based on invoice attributes such as amount, department, or urgency. Role-based approvals add another layer of flexibility, enabling invoices to be routed according to the organizational hierarchy or cross-functional needs ensuring comprehensive review. An HR system integration is a critical component for configuring dynamic approvals by role, department, or project - enabling approval flows to automatically update with organizational changes, simplifying approval setup, and reducing delays.  

Additionally, dynamic approvals can include threshold-based features that further enhance the process. Invoices are directed to different approvers based on amount thresholds, with higher-value invoices requiring senior management approval or pre-set thresholds bypassing approvals and going straight through for payment processing.

By incorporating machine learning and algorithms, an AI software solution can continuously learn and optimize routing based on historical patterns. Integrated notifications keep approvers informed, making the entire process more efficient and aligned with the organization's strategic goals.

Vic.ai for invoice approval workflows

Vic.ai is at the forefront of transforming invoice approval workflows with its autonomous approval flow technology. The Vic.ai autonomous finance platform leverages AI to support end-to-end invoice processing, including intelligent data extraction and autonomous approvals. With Vic.ai, organizations can achieve a level of efficiency and accuracy previously unattainable with manual processes.

Vic.ai offers dynamic, role-based approval flows that automatically update with organizational changes. Vic.ai integrates with 50-plus HR systems to use real-time data to manage approvals by role, department, or project. The approval flow automatically updates anytime there is a change, simplifying the process and avoiding unnecessary delays.

By automating the invoice approval process, Vic.ai also enables finance and accounting teams to focus on more strategic tasks, reduce the risk of errors, and improve vendor relationships. 

Improving your invoice approval workflow is not just about eliminating pain points — it's about setting your organization up for long-term success. You can create a streamlined, efficient, error-free invoice approval process by adopting best practices, implementing automation, and leveraging AI.